RMI report maps five pathways for stronger utility innovation pilots

Pilot and demonstration projects have long been a preferred tool for U.S. electric utilities testing new technologies and business approaches, yet a 2017 report from the Rocky Mountain Institute (RMI) argues that most of these efforts fall well short of driving meaningful change.

Written by Leia Guccione, Mike Henchen, Anthony D. Teixeira, and Courtney Fairbrother, "Pathways for Innovation: The Role of Pilots and Demonstrations in Reinventing the Utility Business Model" diagnoses the structural weaknesses in how utilities design and apply innovation programs. The authors direct their analysis at the intersection of utility operations, regulatory oversight, and distributed energy resource (DER) technology deployment.

Pilots and demonstrations: a critical but misunderstood distinction

One of the report's core findings is that pilots and demonstrations are not interchangeable—they serve different purposes and tend to concentrate on different topic areas, as illustrated in RMI's Figure 1. Conflating the two, the authors contend, leads utilities and regulators to draw the wrong conclusions from project results.

Pilots are typically designed to test whether a concept works under controlled conditions, while demonstrations are meant to prove viability at a scale or in a context closer to real-world deployment. When utilities treat a small-scale pilot as sufficient evidence for full deployment decisions—or vice versa—the resulting data rarely supports sound policy or investment choices.

This distinction matters especially as utilities face mounting pressure to integrate rooftop solar, battery storage, demand response, and other DER technologies into grids originally built around centralized generation.

Five themes shape the path forward

RMI identifies five themes along which the innovation pathway can improve, captured in the report's Figure 2. The authors do not present these as isolated fixes but as interconnected levers—weakness in one area tends to undermine progress in the others.

The five-theme framework applies across the full lifecycle of a project, from initial design and stakeholder alignment through data collection, regulatory review, and eventual scale-up or discontinuation. By mapping the pathway in this way, the report gives utilities and regulators a structured basis for evaluating where their existing programs break down.

A three-audience approach to recommendations

Rather than placing the burden of change solely on utilities, RMI addresses recommendations to three distinct groups: electric utilities themselves, the state and federal regulators who set the rules governing utility investment, and the DER technology providers whose products and services are often the subject of these innovation programs.

This multi-stakeholder framing reflects a key insight in the report: the barriers to effective utility innovation are systemic, not organizational. Regulatory rate structures, for example, can discourage utilities from investing in projects whose benefits accrue to customers or the grid rather than shareholders. Technology providers, meanwhile, may have incentives to advocate for program designs that favor their products over rigorous testing.

By identifying how each group's incentives and constraints interact, RMI positions the report as a diagnostic tool as much as a prescriptive one.

Context and continued relevance

Published in 2017, the report arrived at a moment when U.S. utilities were grappling with the early waves of distributed solar adoption and the first serious state-level efforts to reform utility business models—most notably New York's Reforming the Energy Vision proceeding.

RMI is an independent nonprofit whose work is funded through philanthropy and fee-for-service partnerships, and the organization publishes its research without charge to inform decision-makers across the energy sector. The authors—Guccione, now RMI's Chief Program Officer for Sectors and Systems, and Henchen, a Principal at the organization—have continued to work on utility transformation in the years since the report's release.

The questions the report raises about how utilities learn from experiments, how regulators evaluate evidence, and how technology providers engage in program design have only grown more consequential as DER penetration has accelerated and grid costs have risen.